Face-to-face banking has been given a lifeline, but what does it mean for loyalty?

Christopher Evans, Joint CEO
08 February 2017
By Christopher Evans, Joint CEO

The announcement this month by the Post Office was good news for customers who prefer face-to-face banking. The Post Office said that new, simplified arrangements with the banking industry will enable 99% of UK personal banking customers to do their day-to-day banking in their branches.

The arrangement is meant to minimise the impact of banks' branch closures, as they seek to move more of their services online, offering more digital and mobile solutions for their customers. For example, HSBC announced that it would close a further 62 branches across the UK this year in light of figures revealing a 40% drop in customers using its branches [1].

It serves as a timely reminder for incumbent banks that not all of their customers want to use financial services online. When we asked how the global mass affluent customer likes to bank (the top 10-15% of earners), the results were evenly split in four. More than a quarter (26 percent), said that they prefer to visit a branch, 24 percent bank via an app, 29 percent favour using a website, and 21 percent showed a preference for the phone. The accepted reasoning for this is because discussing a mortgage or making a deposit is still something people would rather do face-to-face, while many routine banking needs are easier to conduct over the phone or online.

However, this partnership won't come without challenges. By outsourcing branch services, banks will have limited influence on employee behaviour, the quality of the service provided and the business's operating model. Moreover, as the Post Office will be working with most major providers, banks could find that customers are unable to distinguish between their services and may become less brand aware.

It is now more important than ever for banks to better analyse customer data and utilise the insight to inform products, services and experiences they provide. Customers want to be treated as individuals and real-time data has a big role to play in delivering superior customer engagement and brand loyalty. High street banks need to seek every opportunity to deliver value to their customers from the provision of relevant, personalised rewards based on individual needs and motivations to status tiers. Loyalty programme managers have always appreciated the need to offer status or exclusives as recognition of their top tier members.  The most forward-thinking banks and credit card companies are also finding ways to keep themselves 'front of mind' and 'front of wallet' by offering customers more ways to interact digitally and to earn with their everyday spending and redeem on lifestyle rewards and experiences. 

Financial brands will increasingly aim to penetrate social groups to provide products and services that meet the demand of newly identified communities, mining large swathes of customer data in order to do so. In marketing terms, this means identifying the 'composite customer', whereby brands cater to their customers based on shared interests and their involvement in groups and communities. This shift away from the traditional approach that segments customers by income, age and demographics alone is becoming less effective. For example, it is too often assumed that the older generation prefer to bank in-branch, but our research has shown that there are groups of millennials that appreciate this service too.

It will be interesting to see how the partnership between the Post Office and the banking sector develops, and how customers react to this service from a brand and loyalty perspective. Banks must innovate their digital capabilities rapidly to ensure that they are offering services that appeal to their customers and keeps their brand top of mind. Relevant rewards that can be redeemed via digital channels will become increasingly important to retain customers, especially where this can be delivered in real time. Banks will ultimately need to ensure that those customers who choose to bank at the Post Office are recognised and treated as valuable customers in other channels where they can manage the experience.

[1] The Guardian:  HSBC to close 62 more branches this year, blaming online banking, January 2017

Article originally featured on Finextra.